It's expected that the traders who are spun off from their prop desks as new financial reforms are put in place will start hedge funds. Goldman's Morgan Sze, for example, is said to be starting a new fund with a number of the Goldman traders who will soon leave the company.

Brown told Asian Investor that those traders will face the challenge of no leverage, and the market's going to miss them and their leverage.

Prop desks at big banks can use as much as $20 billion in capital because they're backed by the bank's balance sheet, he says.

As they migrate into hedge funds, he suspects, they will have difficulty raising capital and using that kind of leverage without access to the bank's balance sheet.

“Banks enjoy tremendous leverage and minimal costs of execution,” Brown, once the director of pan-Asia systematic trading at Morgan Stanley in Hong Kong.

“Thus, as hedge funds, they might not be able to trade as aggressively, which will change the market structure in the long term.”

The change could also have no effect, he said. And likewise, of course it's possible that the spun-off traders will do fine. Tons of hedge funds have been started by traders who used to run prop strategies at banks. The biggest difficulty the new traders will face is that it doesn't seem like their choice to leave.

Usually, traders have left when it's obvious that they're just coming off a big trade or they have run a strategy successfully for years. Pierre Henri Flamand, who left Goldman after running Principal Strategies earlier this year, is a one example. Josh Birnbaum, who left Goldman to start Tilden Park Capital after shorting the subprime crisis a la John Paulson, is another.

The new batch of spun-out traders aren't choosing to leave because they think they can do better on their own, they're being forced out by new financial regulations. That may be a challenge when it comes time to raise money. But of course if they thought it would be, the traders would probably stay at Goldman in another unit. Apparently they're welcome to, and some are planning on it.